White House Considers Eliminating Energy Dept. : Policy: The agency is told to devise plan for cutting its budget by 20%. Some protest talk of routing its nuclear-related functions to the Pentagon.

WASHINGTON — The White House, seeking major budget cutbacks to help pay for a middle-income tax cut, has directed the Energy Department to prepare option plans for at least a 20% reduction in funding and possibly for complete elimination of the agency.

Although a civilian agency, the Energy Department is responsible for development of the nation’s nuclear weapons and for cleaning up the massive radioactive waste problems that are part of the legacy of the Cold War. But government sources said the department’s $6-billion environmental management program and its $4.3-billion defense program would be hit hardest by the expected cutbacks.

The Energy Department’s budget is about $18 billion a year, and by no means could all of that be saved even if the department were abolished. Officials said many of its functions--including the environmental and weapons programs--would have to be transferred to other government agencies if the department were eliminated.

Still, with resurgent Republicans vowing to slash taxes for middle-income Americans, President Clinton is under political pressure to come up with a plan of his own--especially since he made middle-class tax cuts a theme of his 1992 election campaign but shied away from the issue as President when faced with the realities of the federal deficit.

Clinton said over the weekend that he would cut taxes on the middle class if ways can be found to avoid increasing the deficit. That means identifying spending cuts for existing government programs to offset the revenues lost in a tax cut. Administration officials have talked in terms of a $40-billion to $50-billion reduction over five years; the GOP has vowed to enact far larger cuts but has not yet offered details of how it would pay for them.

Vice President Al Gore and budget officials involved in the search for spending cuts are scheduled to confer with Clinton today on the options prepared by various departments. The President apparently will sign off on some cuts in time to announce them in a speech he plans to deliver from the Oval Office at 6 p.m. PST Thursday.

Assistant Secretary of Energy Sue Tierney acknowledged in a news briefing Monday that the department was facing “painful cuts everywhere,” but she declined to give any specifics.

“We are looking at a range of numbers that would take us to really the most bare-bones kind of government functions, in all of our mission areas from science, national security, energy and environmental management,” Tierney said.

Larry J. Haas, an Office of Management and Budget spokesman, declined to comment on the directive to the Energy Department. He insisted that neither Clinton nor any of his advisers have issued “an across-the-board edict of any kind regarding the size of the department or agency budget cuts throughout the government.”

Clinton “is not targeting any one or any few agencies for dramatic change, but will consider dramatic change in quite a number of different departments and agencies,” Haas said.

Several officials confirmed the directive to the Energy Department, however.

Energy Secretary Hazel O’Leary has strongly opposed suggestions that her department might be targeted for elimination. Tierney said that O’Leary welcomes “healthy discussions of whether or not the department’s missions should be done at the department or somewhere else.” But she said O’Leary doubted it would “save a lot of money” to transfer the department’s functions to other agencies.

There has been speculation that if the Energy Department were eliminated, its nuclear weapons-related functions would go to the Defense Department. Critics have argued that this would undermine a long-standing bipartisan agreement that stewardship of nuclear stockpiles should rest in civilian hands.

An Energy Department official, who declined to be named, said O’Leary urged Clinton and his top advisers to put more emphasis on seeking cuts in “the whole government rather than just willy-nilly eliminating one department.”

A 20% cut in the department’s budget, the official said, “will hurt some of the initiatives that President Clinton has considered priorities, such as environmental cleanup and defense work. It would severely limit our defense role of taking care of nuclear weapons.”

Several interested organizations, after hearing from energy officials that their department might be eliminated, sent letters of protest to Clinton on Monday.

“We are writing to urge you in the strongest possible terms not to abolish the Department of Energy or transfer its nuclear weapons-related functions to the Department of Defense,” wrote Robert Wages, president of the Oil, Chemical & Atomic Workers International Union.

The Union of Concerned Scientists declared that abolishing the department would be “a historic mistake” that would put valuable programs at risk “for questionable political or economic benefit.”

Nonetheless, the White House--caught between the fiscal rock of the federal deficit and the political hard place of an unhappy electorate--has little choice but to consider significant spending cuts.

No final decisions have been made, said a senior White House official, “but we all know the public remains dissatisfied with how the federal government works.”